Aereo Makes Its Way To Washington

In late 2010, a Senate subcommittee hearing featured an entertaining contretemps between News Corp. COO Chase Carey and then-Cablevision CEO Tom Rutledge on retransmission consent payments. Fair or
not, Carey took a lot of heat that day from the subcommittee chairman, Sen. John Kerry.

News Corp.’s Fox network had kept World Series games out of Cablevision homes as the two sides
fought over how much Cablevision would pay to continue carrying Fox. Kerry felt viewers were being used as “pawns” as wealthy corporations squared off in that dispute and others, which led
to blackouts.

Alas, nothing came of the hearing. Cable operators and local stations continue to battle each other over the so-called retrans dollars and stations go dark.

Now, the
retrans battle has a new front. The Barry Diller-backed Aereo device, now available in New York, has station groups apoplectic and filing lawsuits.

On Tuesday, Diller appeared at a hearing of
a full Senate committee on the emergence of online video and its future. Aereo was a topic.

Boy, would it have been interesting if a top executive from a station group had been invited to
testify – no one was -- offering a chance to effectively litigate the fight as the wheels of justice churn slowly. A Carey-Rutledge-type debate featuring the smart and witty Diller vs. Station
Group CEO might have been a C-Span hit.

For $12 a month, Aereo allows a consumer to view broadcast stations live on smartphones, tablets and over-the-top devices such as Roku and Apple TV.
Users can record up to 40 hours of programming with a remote DVR.

Station groups feel as if it cheats them out of retrans payments.

At the hearing, Diller was wisely asked by Sen. Jim
DeMint what he would have done vis-à-vis Aereo had he been in a previous role in charge of a station group. He was honest, saying he would have acted as broadcasters have done forever:
“protect their arena and do anything to prevent anyone else from getting into it.”

“But,” he went on. “I would also recognize that part of being a broadcaster was
receiving a free license and in return, you programmed in the public interest and convenience.”

Continuing, he said that means an antenna or other device should allow a person to
“receive a signal without anybody taking a toll -- or doing anything to prevent you from receiving that signal directly.” Aereo facilitates that, he said, and is the “quid pro quo
for a broadcaster receiving a free license.”

Viewed in light of his running, say, Fox again, Diller’s public-service angle is tough to believe. Retrans dollars are fueling the
station business and he would want a chunk.

But it’s a legitimate argument. It’s effectively the same one Rutledge was advancing two years ago. If the government’s original
intent was to make broadcasting free and widely available, why should intermediaries – cable operators, Aereos -- have to pay to facilitate that?

It will take a long time for Aereo to
gain enough customer interest to truly deprive stations of revenues. Arguably, had Diller not been a visible backer, it would have flown under the radar and perhaps avoided stations’ notice.

(Curious is why cable operators haven’t been more active in fighting Aereo since it is an over-the-top service and could lead to cord-cutting? Perhaps, they’re happy to let the stations
fit the legal bills and are eager for a public debate over the legitimacy of retrans dollars, which might ultimately benefit them.)

Not to be overlooked, though, is even as Diller argues Aereo
is simply helping fulfill the original intent of broadcasting, he is capitalizing on it and making money off the public airwaves. Aereo is not simply transmitting them, but charging $12 a month for
the work.

The merits of stations receiving retrans dollars should be the subject of a healthy debate – perhaps in light of reworking the 1996 telecommunications act – but Aereo
should not be looked upon as a heroic tool in fighting for the people vs. power.